Albertsons 2015 Annual Report Download - page 40

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$5, a multi-employer pension plan withdrawal charge of $4, offset in part by a gain on cash settlement received from credit card
companies of $10. When adjusted for these items, the remaining $47 increase in Retail Food’s operating earnings is primarily due
to $83 of cost reduction initiatives including lower depreciation expense and reduced consulting fees, $14 of lower logistics costs
and $11 of a LIFO charge decrease, offset in part by $20 of higher shrink, $17 of incremental investments to lower prices to
customers, $11 of higher insurance costs, $8 of lower lease reserve benefits and $3 of higher advertising costs.
Corporate operating loss for fiscal 2014 was $56, compared with $339 for fiscal 2013. Corporate expenses for fiscal 2014 include
costs and charges of $24, comprised of severance costs and accelerated stock-based compensation charges of $19, contract
breakage and other costs of $3 and asset impairment charges of $2. Corporate expenses for fiscal 2013 included costs and charges
of $21, comprised of severance costs of $15 and asset impairment and other charges of $6. When adjusted for these items, the
remaining $286 net improvement in Corporate operating loss was primarily due to the $198 of incremental fees received under
the TSA and $89 of cost reduction initiatives including lower employee-related costs.
Interest Expense, Net
Interest expense, net for fiscal 2014 was $407, compared with $269 for fiscal 2013, primarily reflecting the unamortized
financing cost charges and original issue discount acceleration of $99 and debt refinancing costs of $75. Interest expense, net for
fiscal 2013 included a $22 charge for the write-off of unamortized financing costs in connection with the debt refinancing
transaction completed during the second quarter of fiscal 2013. When adjusted for these items, the remaining Interest expense, net
decrease is due to lower average interest rates on outstanding borrowings.
Income Tax Provision (Benefit)
Income tax expense for fiscal 2014 was $5, or 30.9 percent of income before income taxes, compared with an income tax benefit
of $163, or 39.3 percent of loss before income taxes, for fiscal 2013. The tax rate for fiscal 2014 included certain insignificant
discrete tax items that together gave rise to the difference between the combined federal and state statutory tax rates and the
effective tax rate. Income tax benefit for fiscal 2013 reflects the operating losses arising during the period and an overall effective
tax rate approximating the combined federal and state statutory tax rate.
Net Earnings (Loss) from Continuing Operations
Net earnings from continuing operations for fiscal 2014 was $13, or $0.02 per basic and diluted share, compared with a net loss of
$253, or $1.24 per basic and diluted share for fiscal 2013. Net earnings from continuing operations for fiscal 2014 includes net
costs and charges of $235 before tax ($144 after tax, or $0.56 per diluted share). Net loss from continuing operations for fiscal
2013 included net charges and costs of $303 before tax ($187 after tax, or $0.88 per diluted share). When adjusted for these items,
the remaining $223 increase in Net earnings from continuing operations ($0.94 per diluted share) is primarily due to $117 after
tax ($0.50 per diluted share) of incremental TSA fees earned related to administrative support of divested NAI banners, $105 after
tax ($0.44 per diluted share) of benefits from cost reduction initiatives including lower employee-related costs, lower depreciation
expense and reduced consulting fees, $17 after tax ($0.07 per diluted share) of lower logistics costs, $8 after tax ($0.03 per diluted
share) of lower interest expense, $8 after tax ($0.03 per diluted share) of a LIFO charge decrease and $6 after tax ($0.02 per
diluted share) of net other administrative expense, offset in part primarily by $18 after tax ($0.07 per diluted share) of incremental
investments to lower prices to customers and $17 after tax ($0.07 per diluted share) of higher shrink.
Income (Loss) from Discontinued Operations, Net of Income Taxes
On January 10, 2013, the Company entered into a stock purchase agreement to sell NAI, which contained components of Retail
Food and Corporate functions. The Company completed the NAI Banner Sale on March 21, 2013. As a result of the NAI Banner
Sale, the financial results for those operations are presented as discontinued operations for all periods presented.
Net sales of discontinued operations were $1,235 for fiscal 2014, compared with $17,230 for fiscal 2013. The net sales for fiscal
2014 reflect sales for the 4-week period from February 24, 2013, the start of fiscal 2014, to March 21, 2013, the date of the
completion of the NAI Banner Sale, whereas net sales for fiscal 2013 reflect such sales for the 52 week period ended February 23,
2013.
Income from discontinued operations, net of tax, was $176 for fiscal 2014, compared with a net loss of $1,203 for fiscal
2013. Results for fiscal 2014 included a pre-tax reduction in the preliminarily estimated loss on the sale of NAI of $90 and
discrete tax benefits of $105 primarily resulting from the settlement of Internal Revenue Service audits for the fiscal 2010, 2009
and 2008 tax years, which were offset in part by severance and other costs of $13.
Refer to Note 16—Discontinued Operations in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this
Annual Report on Form 10-K for further discussion.